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| 1. |
Why is a firm under perfect competition a price taker and not a price maker? Explain |
| Answer» Solution :The no. of SELLERS is so LARGE that the share of each seller is INSIGNIFICANT in the total supply. Hence, an individual seller cannot influence the market price. Similarly, a single buyer's share in total purchase is so insignificant because of their large no. that an individual buyer cannot influence the market price. Under such CONDITIONS, price of a commodity is determined by the market forces of demand and supply and each buyer and seller has to accept the same price. As a RESULT, uniform price prevails in the market. | |